Shire Pharmaceuticals Group plc
Hampshire International Business Park, Chineham, Basingstoke RG24 8EP UK
Tel +44 1256 894000 Fax +44 1256 894708
http://www.shire.com
For Immediate Release
12 noon BST 7am EDT
Strong third quarter results: good pipeline progression
On track for another very good year
Basingstoke, UK - November 4, 2004 - Shire Pharmaceuticals Group plc (LSE: SHP,
NASDAQ: SHPGY, TSX: SHQ) announces results for the third quarter to September
30, 2004.
Third Quarter 2004 Unaudited Results Highlights
- --------------------------------------------------------------------------------------------------------------------
Restated(1)
US GAAP Q3 2004 Q3 2003
$M $M Growth
- --------------------------------------------------------------------------------------------------------------------
Total revenues 344.9 283.4 +22%
Operating income 113.1 97.6 +16%
Income from continuing operations before income taxes and
equity in earnings/(losses) of equity method investees 105.9 98.5 +8%
Income from continuing operations 77.0 73.3 +5%
Net income 77.0 64.6 +19%
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share (EPS):
Per ordinary share
Continuing operations 15.3c 14.4c +6%
Discontinued operations - (1.6c)
------- ---------
15.3c 12.8c +20%
Per American Depositary Share (ADS) 45.8c 38.3c +20%
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Non-US GAAP
- --------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share (EPS) excluding reorganization
costs and the loss from discontinued operations(2):
Per ordinary share 16.7c 14.4c +16%
Per American Depositary Share (ADS) 50.1c 43.3c +16%
- --------------------------------------------------------------------------------------------------------------------
Note: Average exchange rates for Q3 2004 and 2003 were $1.82: (pound)1.00
and $1.62: (pound)1.00 respectively.
(1) The results for the three months to September 30, 2003 have been
restated to reflect the disposal of the vaccines business, accounted
for as a discontinued operation in accordance with generally accepted
accounting principles in the United States of America (US GAAP). In
accordance with US GAAP guidelines, 2003 figures from revenues down to
income from continuing operations exclude the results of the vaccines
business, while 2003 net income and earnings per share include the
results of the vaccines business.
(2) This is a non-US GAAP financial measure. Management believes that the
presentation of this non-US GAAP financial measure provides useful
information to investors regarding Shire's underlying performance as
the costs associated with the reorganization and the loss from
discontinued operations are not part of the Company's ongoing
operations. A reconciliation of this non-US GAAP financial measure to
the most directly comparable US GAAP financial measure can be found on
page 21.
1
Matthew Emmens, Chief Executive Officer, said:
"We have continued to deliver good growth in the third quarter, driven by both
product sales and royalty income. These results highlight the strong performance
of the underlying business and the success of the ongoing reorganization. We are
on track to deliver our previous guidance of expected earnings growth for
continuing operations in excess of 20% for 2004. Revenue growth for the year
could now be double-digit, offset by an increase in costs relating to new
product launches.
"To date in 2004, Shire has received four product approvals in both Europe and
North America, reflecting the quality of our late stage pipeline. In the last
three months we have received approval for two key products, FOSRENOL(R) in the
US and ADDERALL XR(R) in the US for the adult indication. In addition, the Food
and Drug Administration (FDA) advised us on October 28, 2004 that ADDERALL XR
was granted a further six months pediatric extension bringing the marketing
exclusivity, under the Hatch-Waxman rules, to April 2005. XAGRID(R) is in the
final stages of the regulatory process within Europe prior to approval. Launches
of FOSRENOL and XAGRID, are planned to commence at the end of this year. Our
pipeline is advancing with a further five projects, SPD417/BIPOTROL(R),
METHYPATCH(R), SPD503, SPD476 and SPD465 having the potential for launch by the
end of 2006.
"We continue to carefully review new in-licensing opportunities for both
projects and products."
Third Quarter 2004 and Recent Events Highlights
o Revenues up 22% to $344.9 million, compared with Q3 2003.
o Net Income increased 19% over Q3 2003.
o Royalties at $56.2 million, an increase of 13% over Q3 2003.
o ADDERALL XR (mixed amphetamine salts) reached 24% share of the total
US ADHD market in September 2004 making it the first treatment choice
in the US. Sales increased by 16% compared with Q3 2003 to $140.1
million.
o ADDERALL XR Adult: FDA approval received on August 12, 2004, launch
commenced.
o ADDERALL XR: six months additional market exclusivity granted by the
FDA.
o FOSRENOL (lanthanum carbonate): FDA approval received on October 26,
2004 - launch planned for December 2004.
o XAGRID (anagrelide hydrochloride): a positive opinion was issued by
the EU regulatory agency in July, the European Commission
decision-making process continues.
o PENTASA(R) 500 mg: launch in progress.
o TROXATYL(R) (troxacitabine) global research, development and marketing
rights were out-licensed to Structural GenomiX Inc. on July 24, 2004.
o $370.1 million of the convertible loan notes were redeemed during the
quarter.
o Completion of the sale of the vaccines business to ID Biomedical
Corporation (IDB) on September 9, 2004.
o First interim dividend of 1 penny per ordinary share paid on October
14, 2004.
o Shire appoints Barbara Deptula as Executive Vice President, Business
Development and member of the Executive Committee.
2
2004 Financial Outlook
Shire's underlying business continues to perform strongly. We are re-iterating
our previously stated guidance and continue to anticipate earnings growth for
continuing operations to be in excess of 20% for 2004, after excluding the
impact of the discontinued vaccines business, the estimated $55 million costs
associated with the reorganization and the $14.8 million gain on the sale of a
portfolio investment. Revenue growth for the year could now be double-digit, up
from our previous guidance of high single digit range, despite the loss of
exclusivity on PROAMATINE(R) (midodrine hydrochloride) in Q3 2003 and the
anticipated impact of generics on AGRYLIN(R) (anagrelide hydrochloride) in the
US. The revenue boost will be offset by launch costs for new products. Beyond
2004 we remain committed to achieving our aspirational target of earnings
growth, on average, in the mid teens range with consistent operating margins.
- Ends -
For further information please contact:
Clea Rosenfeld - Investor Relations +44 1256 894 160
Jessica Mann - Media +44 1256 894 160
Notes to editors
Shire Pharmaceuticals Group plc
Shire Pharmaceuticals Group plc (Shire) is a global pharmaceutical company with
a strategic focus on meeting the needs of the specialist physician and currently
focuses on developing projects and marketing products in the areas of central
nervous system (CNS), gastrointestinal (GI), and renal diseases. Shire has
operations in the world's key pharmaceutical markets (US, Canada, UK, France,
Italy, Spain and Germany) as well as a specialist drug delivery unit in the US.
For further information on Shire, please visit the Company's website:
www.shire.com
THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
Statements included herein that are not historical facts are forward-looking
statements. Such forward-looking statements involve a number of risks and
uncertainties and are subject to change at any time. In the event such risks or
uncertainties materialize, Shire's results could be materially affected. The
risks and uncertainties include, but are not limited to, risks associated with
the inherent uncertainty of pharmaceutical research, product development,
manufacturing and commercialization, the impact of competitive products,
including, but not limited to, the impact of those on Shire's Attention Deficit
& Hyperactivity Disorder (ADHD) franchise, patents, including but not limited
to, legal challenges relating to Shire's ADHD franchise, government regulation
and approval, including but not limited to the expected product approval dates
of METHYPATCH(R) (methylphenidate), XAGRID(R) (anagrelide hydrochloride) and
SPD417/ BIPOTROL(R) (carbamazepine), Shire's ability to secure new products for
development, the implementation of the current reorganization and other risks
and uncertainties detailed from time to time in Shire's filings, including its
Annual Report on Form 10-K for the year ended December 31, 2003, with the
Securities and Exchange Commission.
3
The following are trademarks of Shire or companies within the Shire Group, which
are the subject of trademark registrations in certain territories
ADDERALL XR(R) (mixed amphetamine salts)
AGRYLIN(R) (anagrelide hydrochloride)
SPD417/ BIPOTROL(R) (carbamazepine)
CARBATROL(R) (carbamazepine)
FOSRENOL(R) (lanthanum carbonate)
PROAMATINE(R) (midodrine hydrochloride)
TROXATYL(R) (troxacitabine)
XAGRID(R) (anagrelide hydrochloride)
The following are trademarks of third parties
3TC(R) (trademark of GlaxoSmithKline (GSK))
METHYPATCH(R) (trademark of Noven)
PENTASA(R) (trademark of Ferring AS)
REMINYL(R) (trademark of Johnson & Johnson)
ZEFFIX(R) (trademark of GSK)
4
OVERVIEW OF US GAAP FINANCIAL RESULTS
1. Introduction
Revenues from continuing operations for the three months to September 30, 2004
increased by 22% to $344.9 million (2003: $283.4 million). Income from
continuing operations before income taxes and equity in earnings /(losses) in
equity method investees increased by 8% to $105.9 million (2003: $98.5 million)
Included in the net income result for the quarter were $10.1 million of
reorganization costs (Q3 2003: $8.7 million of loss from discontinued
operations). The reported net income under US GAAP including these elements for
the three months to September 30, 2004 showed an increase of 19% when compared
to Q3 2003.
The business generated a cash inflow from operating activities of $75.5 million
(2003: $114.7 million).
During the three months ended September 30, 2004 the Company redeemed $370.1m of
its convertible loan notes. This resulted in a reduction in cash and cash
equivalents, restricted cash and marketable securities at September 30, 2004
($1,331.9 million) compared to December 31, 2003 ($1,414.0 million). After
deduction of borrowings, this translates to a net cash position (cash and cash
equivalents, restricted cash and marketable securities less current and
long-term debt) of $1,325.9 million (December 31, 2003: $1,037.7 million). Where
appropriate, this may be used to further enhance our portfolio through product
and project acquisitions.
2. Product sales
For the three months to September 30, 2004, product sales increased 22% ($51.4
million) to $283.7 million (2003: $232.3 million) and represented 82% of total
revenues (2003: 82%).
Third Quarter 2004 Product Highlights
- ------------------------------ ------------------- ------------------- ------------------ ---------------------------
Sales Sales** US Rx1 September 2004 1
Product $M Growth Growth US Market Share
- ------------------------------ ------------------- ------------------- ------------------ ---------------------------
ADDERALL XR 140.1 16% 22% 24%
AGRYLIN 49.7 92% 8% 27%
PENTASA 33.0 66% 0% 11%
CARBATROL 11.2 -3% 10% 45%
- ------------------------------ ------------------- ------------------- ------------------ ---------------------------
1 IMS Prescription Data - Product specific
**Compared to Q3 2003
ADDERALL XR for the treatment of ADHD
Sales of ADDERALL XR for the three months to September 30, 2004 were $140.1
million, an increase of 16% compared to prior year (2003: $121.3 million).
US prescriptions were up 22% over the same period, due primarily to a 15%
increase in the total US ADHD market.
The difference between sales growth and prescription growth was driven by the
wholesalers destocking to normal stock levels in Q3 2004 compared to a moderate
level of stocking in Q3 2003, only partially offset by the impact of price
increases in November 2003 and June 2004.
ADDERALL XR had a 24% share of the total US ADHD market in September 2004
(September 2003: 22%) and is now the leading brand in the US ADHD market.
Following submission to the FDA of clinical data examining the effect of
ADDERALL XR in adolescent pediatric patients and meeting the FDA's "written
request" requirements, Shire is entitled, to an additional six months market
exclusivity for ADDERALL XR in the US under the Hatch-Waxman regulations. The
additional exclusivity period will expire on April 11, 2005.
Litigation proceedings relating to ADDERALL XR are in progress. Further
information may be found in our filings with the US Securities and Exchange
Commission, including our Annual Report on Form 10-K for the year ended December
31, 2003 and our most recent quarterly report on Form 10-Q for the period ended
June 30, 2004.
5
AGRYLIN for the treatment of thrombocythemia
Worldwide sales of AGRYLIN for the three months to September 30, 2004 were $49.7
million, an increase of 92% compared to prior year (2003: $25.9 million).
US prescription volumes were up 8% over the same period, in line with hydrea and
generic hydroxyurea market growth.
The difference between sales growth and prescription growth is due mainly to
significant wholesaler stocking in anticipation of the launch of generics in Q4
2004, compared to de-stocking in Q3 2003, and a price increase in November 2003.
The Company anticipates wholesaler inventory levels could normalize in Q4 2004
due to the delayed launch of generics.
AGRYLIN had a 27% share of the total US AGRYLIN, hydrea and generic hydroxyurea
prescription market in September 2004 (September 2003: 27%).
AGRYLIN's pediatric exclusivity expired in September 2004 in the US.
AGRYLIN will be known as XAGRID in the EU and following the anticipated license
approval the product will have up to 10 years market exclusivity in accordance
with current orphan medicinal product legislation.
PENTASA for the treatment of ulcerative colitis
Sales of PENTASA for the three months to September 30, 2004 were $33.0 million,
an increase of 66% compared to the prior year (2003: $19.8 million).
US prescription volumes were constant over the same period, in line with the
mesalamine / olsalazine market growth.
The difference between sales growth and prescription growth arises mainly from a
moderate level of wholesaler stocking in Q3 2004, including $5 million of the
new 500mg launch stock, compared with a moderate level of destocking in Q3 2003.
In addition there were price increases in November 2003 and September 2004.
PENTASA had an 11% share of the total US oral mesalamine / olsalazine
prescription market in September 2004 (September 2003: 11%).
CARBATROL for the treatment of epilepsy
Sales of CARBATROL for the three months to September 30, 2004 were $11.2
million, a decrease of 3% compared to prior year (2003: $11.6 million).
US prescription volumes were up 10% over the same period, due to the impact of
renewed promotional efforts.
The difference between the sales decrease and prescription growth is due to the
incidence of sales deductions this quarter resulting from price increases in
September 2003.
CARBATROL had a 45% share of the total US extended release carbamazepine
prescription market in September 2004 (September 2003: 40%).
Litigation proceedings relating to CARBATROL are in progress. Further
information may be found in our filings with the US Securities and Exchange
Commission, including our Annual Report on Form 10-K for the year ended December
31, 2003 and our most recent quarterly report on Form 10-Q for the period ended
June 30, 2004.
3. Royalties
Royalty revenue increased 13% to $56.2 million for the three months to September
30, 2004 (2003: $49.7 million) as a result of strong sales and positive foreign
exchange movements.
6
Third Quarter 2004 Royalty Highlights
- ----------------------------------------------------------------------------------------------------------------------
Product Royalties to Shire Royalty2 Worldwide in-market sales by licensee3 in
$M Growth Q3 2004
% $M
- ----------------------------------------------------------------------------------------------------------------------
3TC 37.9 7%* 291
- ----------------------------------------------------------------------------------------------------------------------
ZEFFIX 7.0 13%** 61
- ----------------------------------------------------------------------------------------------------------------------
Other 11.3 37% n/a
- ----------------------------------------------------------------------------------------------------------------------
* The impact of foreign exchange movements has contributed +2% to the reported
growth
** The impact of foreign exchange movements has not contributed to the
reported growth
2 Compared with Q3 2003
3 GSK
3TC
Royalties from 3TC for the three months to September 30, 2004 were $37.9
million, an increase of 7% compared to Q3 2003 ($35.3 million). This was
primarily due to a return to growth in the US market.
Shire receives royalties from GSK on worldwide sales of 3TC, with the exception
of Canada where a commercialization partnership with GSK exists. GSK's worldwide
sales of 3TC, for the three months to September 30, 2004 were $291 million, an
increase of 7% compared to the three months ended September 30, 2003 ($272
million).
ZEFFIX
Royalties from ZEFFIX for the three months to September 30, 2004 were $7.0
million, an increase of 13% compared to Q3 2003 ($6.2 million). The product
continues to show strong growth in the UK, the US and Japan.
Shire receives royalties from GSK on worldwide sales of ZEFFIX, with the
exception of Canada where a commercialization partnership with GSK exists. GSK's
worldwide sales of ZEFFIX, for the three months to September 30, 2004, were $61
million, an increase of 17% compared to the three months ended September 30,
2003 ($52 million).
OTHER
Other royalties are primarily in respect of REMINYL, a product marketed
worldwide by Johnson & Johnson (J&J), with the exception of the United Kingdom
and Ireland where Shire has exclusive marketing rights.
Sales of REMINYL, a treatment for mild to moderately severe dementia of the
Alzheimer's type, are growing well in the Alzheimer's market.
4. Financial details
Cost of product sales
For the three months to September 30, 2004, our cost of product sales amounted
to 14% of product sales (2003: 14%).
Research and development (R&D)
R&D expenditure increased from $47.3 million in Q3 2003 to $57.8 million in Q3
2004, due to the good progress of late stage Phase III trials. Shire's pipeline
is now well advanced with six projects in late stage development or
registration. Expressed as a percentage of total revenues, R&D expenditure was
17% for the three months to September 30, 2004 (2003: 17%).
Selling, general and administrative (SG&A)
SG&A expenses increased from $79.9 million in Q3 2003 to $104.7 million in Q3
2004, an increase of 31%, reflecting marketing expenses related to new product
launches including FOSRENOL, XAGRID and ADDERALL XR (adult). As a percentage of
product sales, these expenses were 37% (Q3 2003: 34%).
7
Depreciation and amortization
The depreciation charge for the three months to September 30, 2004 was $5.3
million (2003: $8.6 million, including $5.5 million of tangible fixed asset
write-downs). The underlying increase was primarily due to accelerated
depreciation on tangible fixed assets as a result of the US site
rationalization. Amortization charges were $15.0 million for the three months to
September 30, 2004 (2003: $17.3 million). Included within the amortization
charge for Q3 2004 is $5.5 million of intangible asset write-downs (2003:
$11.2).
Reorganization costs
During the three months to September 30, 2004, $10.1 million of reorganization
costs were incurred. The costs related to employee severance ($2.6 million),
relocation ($3.6 million) and other costs associated with the reorganization
($3.9 million).
Interest income and expense
For the three months to September 30, 2004, the Company received interest income
of $5.7 million (2003: $3.7 million). This increase was primarily due to rising
interest rates. Interest expense increased from $2.0 million to $8.0 million.
This increase is due to the write-off of costs capitalized at the time the
convertible loan notes were issued. These costs were being amortized over the
life of the notes but were written-off following the redemption of $370.1
million of the loan notes during the quarter.
Other (expense)/income, net
For the three months to September 30, 2004, other expense totaled $4.9 million
(2003: expense of $0.8 million). The expense in Q3 2004 and Q3 2003 primarily
related to the write-down of certain portfolio investments.
Taxation
The effective tax rate on continuing operations for the three months to
September 30, 2004 was 28% (2003: 26%). The effective tax rate on continuing
operations for the nine months to September 30, 2004 is 28% and it is
anticipated that this effective rate on continuing operations will remain for
the full year. At September 30, 2004, deferred tax assets of $86.7 million were
recognized (December 31, 2003: $63.1 million).
Equity in earnings/(losses) of equity method investees
During the three months to September 30, 2004, we received $1.1 million
representing our 50% share of earnings from our antiviral commercialization
partnership with GSK in Canada (2003: $0.9 million). Included in the figure to
September 30, 2003 was a loss of $0.9 million representing our 50% share of the
losses of our commercialization partnership with Qualia Computing Inc., which
was sold in December 2003.
Discontinued operations
The Company completed the disposal of its vaccines business to IDB on September
9, 2004. The vaccines business impacted net income with losses of $20.1 million
for the 9 months to September 30, 2004 (2003: $21.6 million). The impact for the
3 months to September 30, 2004 was $nil (2003: $8.7 million). In addition to the
loss for the 9 months to September 30, 2004 is the estimated loss on the
disposal of the vaccines business of $44.2 million, recognized in Q2 2004,
resulting principally from the write down of a $70 million loan to IDB. IDB is
required to reimburse Shire in full for the net cost of operating the vaccines
business from June 30, 2004. Consequently the cost of operations for the results
of the vaccines business, from July 1, 2004 to September 9, 2004, have been
offset by the IDB re-imbursement in the statement of operations.
The transaction was treated as a discontinued operation in the previously stated
results to June 30, 2004. In accordance with US GAAP disclosure requirements for
discontinued operations, the 2003 results have been restated. The results of the
discontinued operation have been removed from all periods on a line-by-line
basis from product sales revenue to income from continuing operations. The net
loss from the discontinued operation, together with the loss on disposal
recognized in Q2 2004, are shown as separate line items.
8
5. R&D pipeline
ADDERALL XR
The FDA has confirmed that Shire has met the terms of a Written Request to
provide data from a clinical program examining the effect of ADDERALL XR in
adolescent pediatric patients. This confirmation provides an additional six
months market exclusivity for ADDERALL XR in the US, until April 11, 2005 under
the Hatch-Waxman regulations.
In August, Shire received FDA approval to market ADDERALL XR for adults. Shire
continues dialogue with the FDA to assess whether it will pursue approval on
higher formulation strengths.
FOSRENOL
On October 26, 2004 Shire received FDA approval to market FOSRENOL in 250mg and
500mg, in the US. Final launch preparations have now begun and we anticipate
that the product will be available in pharmacies before the end of 2004.
Following Swedish regulatory approval, Shire is pursuing further European
approvals for FOSRENOL via the Mutual Recognition Process. It is anticipated
that the product will be available in the first European market early in 2005.
XAGRID
XAGRID: A positive opinion issued by the EU regulatory agency on July 29, 2004 -
the European Commission decision-making phase is underway. Phased launch
throughout Europe will follow the issue of the EU license.
Shire will commence a phased launch throughout Europe and expects the drug to be
available for prescribing from the New Year.
9
US GAAP Results for the 9 months to September 30, 2004
Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
2004 2003
$'000 $'000
------------------- -------------------
ASSETS
Current assets:
Cash and cash equivalents 1,017,890 1,063,362
Restricted cash 30,901 46,474
Marketable securities 283,090 304,129
Accounts receivable, net 244,588 194,583
Inventories 45,892 43,128
Deferred tax asset 64,577 64,532
Prepaid expenses and other current assets 94,882 47,403
----------- -----------
Current assets from continuing operations 1,781,820 1,763,611
Current assets from discontinued operations - 24,096
----------- -----------
Total current assets 1,781,820 1,787,707
Investments 108,935 72,975
Property, plant and equipment, net 105,802 94,495
Goodwill, net 222,456 221,231
Other intangible assets, net 303,713 307,882
Deferred tax asset 22,165 -
Other non-current assets 20,396 22,420
----------- -----------
Long-term assets from continuing operations 783,467 719,003
Long-term assets from discontinued operations - 72,070
----------- -----------
Total assets 2,565,287 2,578,780
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt 5,907 290
Accounts payable and accrued expenses 275,851 205,779
Other current liabilities 148,607 37,127
----------- ------------
Current liabilities from continuing operations 430,365 243,196
Current liabilities from discontinued operations - 10,479
----------- ------------
Total current liabilities 430,365 253,675
Long-term debt, excluding current installments 116 376,017
Deferred tax liability - 1,400
Other long-term liabilities 26,870 23,783
----------- ------------
Long-term liabilities from continuing operations 26,986 401,200
Long-term liabilities from discontinued operations - 779
----------- -----------
Total liabilities 457,351 655,654
----------- -----------
10
US GAAP Results for the 9 months to September 30, 2004
Consolidated Balance Sheets (continued)
(Unaudited)
September 30, December 31,
2004 2003
$'000 $'000
Shareholders' equity:
Ordinary shares of 5p par value; 800,000,000 shares authorized; and
483,800,689 (December 31, 2003: 477,894,726) shares issued and
outstanding 40,063 39,521
Exchangeable shares; 4,292,816 (December 31, 2003: 5,839,559) shares
issued and outstanding 198,810 270,667
Additional paid-in capital 1,062,978 983,356
Accumulated other comprehensive income 78,794 79,007
Retained earnings 727,291 550,575
----------- -----------
Total shareholders' equity 2,107,936 1,923,126
----------- -----------
Total liabilities and shareholders' equity 2,565,287 2,578,780
----------- -----------
The results for December 31, 2003 have been restated to reflect the disposal of
the vaccines business that has been accounted for as a discontinued operation.
11
US GAAP Results for the 9 months to September 30, 2004
Unaudited Consolidated Statements of Operations
3 months to 3 months to 9 months to 9 months to
September 30, September 30, September 30, September 30,
2004 2003 2004 2003
$'000 $'000 $'000 $'000
----------- ----------- ----------- -----------
Total revenues 344,909 283,378 989,469 884,312
Cost of product sales (38,933) (32,700) (100,010) (106,160)
----------- ----------- ----------- -----------
Gross profit 305,976 250,678 889,459 778,152
Operating expenses (192,922) (153,105) (551,961) (481,780)
----------- ----------- ----------- -----------
Operating income 113,054 97,573 337,498 296,372
----------- ----------- ----------- -----------
Interest income 5,697 3,688 14,101 13,099
Interest expense (8,032) (1,984) (12,259) (7,311)
Other (expense)/income, net (4,859) (788) 4,403 (10,561)
----------- ----------- ----------- -----------
Total other (expense)/income, net (7,194) 916 6,245 (4,773)
----------- ----------- ----------- -----------
Income from continuing operations before
income taxes and equity in
earnings/(losses) of equity method investees 105,860 98,489 343,743 291,599
Income taxes (29,960) (25,139) (97,188) (75,122)
Equity in earnings/(losses) of equity
method investees 1,140 (45) 3,358 (1,699)
----------- ----------- ----------- -----------
Income from continuing operations 77,040 73,305 249,913 214,778
Loss from discontinued operations - (8,686) (20,135) (21,608)
Loss on disposition of discontinued
operations - - (44,157) -
----------- ----------- ----------- -----------
Net income 77,040 64,619 185,621 193,170
----------- ----------- ----------- -----------
Earnings per share:
Basic
Continuing operations 15.5c 14.8c 50.4c 43.0c
Loss from discontinued operations - (1.7c) (4.1c) (4.3c)
Loss on disposition of discontinued
operations - - (8.9c) -
----------- ----------- ----------- -----------
Net income 15.5c 13.1c 37.4c 38.7c
----------- ----------- ----------- -----------
Diluted
Continuing operations 15.3c 14.4c 49.2c 42.0c
Loss from discontinued operations - (1.6c) (3.9c) (4.1c)
Loss on disposition of discontinued
operations - - (8.6c) -
----------- ----------- ----------- -----------
15.3c 12.8c 36.7c 37.9c
----------- ----------- ----------- -----------
Weighted average number of shares:
Basic 496,474,005 494,827,334 496,090,191 499,414,490
Diluted 509,777,052 515,826,822 515,070,302 520,530,702
----------- ----------- ----------- -----------
The results for the three and nine months ended September 30, 2003 have been
restated to reflect the disposal of the vaccines business, which has been
accounted for as a discontinued operation.
12
US GAAP Results for the 9 months to September 30, 2004
Unaudited Consolidated Statements of Cash Flows
3 months to 3 months to 9 months to 9 months to
September 30, September 30, September 30, September 30,
2004 2003 2004 2003
$'000 $'000 $'000 $'000
------------------ ------------- ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations 77,040 73,305 249,913 214,778
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization -
Cost of product sales 681 - 1,965 -
Sales, general and administration 14,891 9,379 40,474 28,439
(Decrease)/increase in provision for doubtful
accounts and discounts (2,132) (596) (2,561) 599
Increase in provision for rebates and returns 16,341 6,416 42,112 6,424
Stock option compensation - options 67 - 165 (24)
Movement in deferred tax asset (16,378) 447 (23,610) (17,397)
Equity in (earnings)/losses of equity method
investees (1,140) 45 (3,358) 1,699
Write-down of long-term investments 5,483 - 13,899 8,472
Other movement on long-term investments - - (1,202) -
Write-down of property, plant and equipment - 5,521 1,239 5,521
Write-down of intangible assets 5,456 11,150 5,456 14,437
Gain on sale of long term investments - - (14,805) -
Loss/(gain) on sale of property, plant and
equipment 86 (104) 8 (104)
Loss on sale of assets held for resale 325 - 325 -
Changes in operating assets and liabilities:
(Increase)/decrease in accounts receivable (72,933) 21,463 (49,261) (35,993)
Decrease/(increase) in inventory 3,890 (2,295) (2,864) (864)
Decrease/(increase) in prepayments and other
current assets 13,832 (5,895) 2,199 (10,328)
(Increase)/decrease in other assets (10,132) 1,803 2,023 2,522
Increase/(decrease) in accounts and notes
payable and other liabilities 39,811 (2,991) 47,322 (3,528)
Increase/(decrease) in deferred revenue 263 - (288) -
----------- ---------- ---------- ----------
Net cash provided by operating activities 75,451 117,648 309,151 214,653
----------- ---------- ---------- ----------
13
US GAAP Results for the 9 months to September 30, 2004 Unaudited Consolidated
Statements of Cash Flows (continued)
3 months to 3 months to 9 months to 9 months to
September 30, September 30, September 30, September 30,
2004 2003 2004 2003
$'000 $'000 $'000 $'000
----------------- ------------- ----------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Movements in short-term deposits (10,933) 1,567 21,039 102,940
Movements in restricted cash 17,343 4,846 15,573 933
Loans issued (23,820) - (23,820) -
Purchase of long-term investments (206) - (5,720) (1,475)
Purchase of property, plant and equipment (10,879) (8,900) (24,840) (35,270)
Purchase of intangible assets (385) (10,608) (12,385) (36,108)
Proceeds from sale of a business 30,000 - 30,000 -
Proceeds from sale of long-term investments - - 26,733 -
Proceeds from sale of property, plant and
equipment 44 852 444 852
Proceeds from assets held for resale 3,630 - 11,289 -
Distribution from long-term investments - - 1,202 -
Dividend received from equity method investees 4,043 2,289 4,043 2,289
----------- ----------- ----------- -----------
Net cash provided by/(used in) investing
activities 8,837 (9,954) 43,558 34,161
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of 2% convertible loan notes (370,109) - (370,109) (29,775)
Repayment of long-term debt and capital leases (36) (63) (171) (167)
Proceeds from issue of common stock, net 285 - 611 -
Proceeds from exercise of options 2,180 127 7,531 2,381
Payments for the redemption of common stock - - - (52,392)
----------- ----------- ----------- -----------
Net cash (used in)/provided by financing
activities (367,680) 64 (362,138) (79,953)
Effect of foreign exchange rate changes on cash
and cash equivalents from continuing operations 3,575 537 2,295 19,000
----------- ----------- ----------- -----------
Net (decrease)/increase in cash and cash
equivalents (279,817) 108,295 (7,134) 187,861
Cash flows used in discontinued operations (9,423) (8,925) (38,338) (22,769)
----------- ----------- ----------- -----------
Net (decrease)/increase in cash and cash
equivalents (289,240) 99,370 (45,472) 165,092
Cash and cash equivalents at beginning of period 1,307,130 910,863 1,063,362 845,141
----------- ----------- ---------- ----------
Cash and cash equivalents at end of period 1,017,890 1,010,233 1,017,890 1,010,233
----------- ----------- ---------- ----------
The results for the three and nine months ended September 30, 2003 have been
restated to reflect the disposal of the vaccines business, which has been
accounted for as a discontinued operation.
14
US GAAP Results for the 9 months to September 30, 2004
Unaudited Consolidated Statements of Cash Flows (continued)
Supplemental information associated with continuing operations:
3 months to 3 months to 9 months to 9 months to
September 30, September 30, September 30, September 30,
2004 2003 2004 2003
$'000 $'000 $'000 $'000
------------------ ------------------- ----------------- -------------------
NON-CASH ACTIVITIES:
Proceeds from sale of a business: Investment
received 60,000 - 60,000 -
Proceeds from sale of a business: Promissory
note received 30,000 - 30,000 -
----------- ----------- ----------- -----------
15
US GAAP Results for the 9 months to September 30, 2004
Selected Notes to the Unaudited US GAAP Financial Statements
(1) Analysis of revenues, operating income and reportable segments
The Company has disclosed segment information for the individual reporting
segments of the business, based on the way in which the business is managed and
controlled. The Company's principal reporting segments are by operational
function, each being managed and monitored separately and serving different
markets. The Company evaluates performance based on operating income. The
Company does not have inter-segment transactions.
The US segment represents our commercial operations in the United States and the
International segment represents the commercial operations in the Rest of the
World. The R&D segment represents all direct research and development costs
incurred by the Company throughout the world. Corporate represents the royalty
business that is managed at the corporate office and certain costs that are
managed at the corporate office and not allocated to the other segments.
The results for the 3 and 9 months to September 30, 2003 have been restated to
reflect the disposal of the vaccines business that has been accounted for as a
discontinued operation.
3 months to September 30, 2004 US International Corporate R&D Total
$'000 $'000 $'000 $'000 $'000
------- -------- -------- ------ --------
Product sales 237,112 46,611 - - 283,723
Licensing and development 2,163 657 - - 2,820
Royalties - 2,287 53,912 - 56,199
Other revenues 1,198 969 - - 2,167
------- -------- -------- ------ --------
Total revenues 240,473 50,524 53,912 - 344,909
------- -------- -------- ------ --------
Cost of product sales 22,274 16,659 - - 38,933
Research and development - - - 57,759 57,759
Selling, general and administrative 69,397 18,947 16,411 - 104,755
Depreciation and amortization (1) 11,496 7,279 1,572 - 20,347
Reorganization costs 6,501 276 1,183 2,101 10,061
------- -------- -------- ------ --------
Total operating expenses 109,668 43,161 19,166 59,860 231,855
------- -------- -------- ------ --------
Operating income/(loss) 130,805 7,363 34,746 (59,860) 113,054
------- -------- -------- ------ --------
3 months to September 30, 2003 US International Corporate R&D Total
$'000 $'000 $'000 $'000 $'000
------- -------- -------- ------ --------
Product sales 190,530 41,752 - - 232,282
Licensing and development 1,355 - - - 1,355
Royalties - 2,282 47,453 - 49,735
Other revenues 6 - - - 6
------- -------- -------- ------ --------
Total revenues 191,891 44,034 47,453 - 283,378
------- -------- -------- ------ --------
Cost of product sales 18,401 14,299 - - 32,700
Research and development - - - 47,277 47,277
Selling, general and administrative 49,440 18,388 12,081 - 79,909
Depreciation and amortization (1) 9,083 16,102 734 - 25,919
------- -------- -------- ------ --------
Total operating expenses 76,924 48,789 12,815 47,277 185,805
------- -------- -------- ------ --------
Operating income/(loss) 114,967 (4,755) 34,638 (47,277) 97,573
------- -------- -------- ------ --------
16
US GAAP Results for the 9 months to September 30, 2004
Selected Notes to the Unaudited US GAAP Financial Statements (continued)
9 months to September 30, 2004 US International Corporate R&D Total
$'000 $'000 $'000 $'000 $'000
------- ------------- ---------- -------- ---------
Product sales 670,412 133,185 - - 803,597
Licensing and development 8,442 1,775 - - 10,217
Royalties - 7,922 162,079 - 170,001
Other revenues 2,637 3,017 - - 5,654
------- -------- -------- ------- -------
Total revenues 681,491 145,899 162,079 - 989,469
------- -------- -------- ------- -------
Cost of product sales 64,135 35,875 - - 100,010
Research and development - - - 143,760 143,760
Selling, general and administrative 214,013 68,752 47,465 - 330,230
Depreciation and amortization (1) 28,605 12,689 4,636 - 45,930
Reorganization costs 18,925 2,972 4,083 6,061 32,041
------- -------- -------- ------- -------
Total operating expenses 325,678 120,288 56,184 149,821 651,971
------- -------- -------- ------- -------
Operating income/(loss) 355,813 25,611 105,895 (149,821) 337,498
------- -------- -------- ------- -------
9 months to September 30, 2003 US International Corporate R&D Total
$'000 $'000 $'000 $'000 $'000
------- -------- -------- ------- -------
Product sales 620,100 112,414 - - 732,514
Licensing and development 2,451 - - - 2,451
Royalties 14 7,206 142,114 - 149,334
Other revenues 13 - - - 13
------- -------- -------- ------- -------
Total revenues 622,578 119,620 142,114 - 884,312
------- -------- -------- ------- -------
Cost of product sales 71,660 34,500 - - 106,160
Research and development - - - 142,050 142,050
Selling, general and administrative 185,066 59,662 46,605 - 291,333
Depreciation and amortization (1) 25,136 20,846 2,415 - 48,397
------- -------- -------- ------- -------
Total operating expenses 281,862 115,008 49,020 142,050 587,940
------- -------- -------- ------- -------
Operating income/(loss) 340,716 4,612 93,094 (142,050) 296,372
------- -------- -------- ------- -------
(1) Included in depreciation and amortization are the write-downs of intangible
assets. Depreciation from manufacturing plant is included within cost of
product sales. Depreciation and amortization relating to R&D assets are included
within US and International segments.
17
US GAAP Results for the 9 months to September 30, 2004
Selected Notes to the Unaudited US GAAP Financial Statements (continued)
(2) Earnings per share
Basic EPS is based upon the net income available to ordinary shareholders
divided by the weighted-average number of ordinary shares outstanding during the
period.
Diluted EPS is based upon net income available to ordinary shareholders divided
by the weighted-average number of ordinary shares outstanding during the period
and adjusted for the effect of all dilutive potential ordinary shares that were
outstanding during the period.
Stock options to purchase approximately 9.8 million and 17.6 million ordinary
shares for the three months and nine months to September 30, 2004 respectively,
were not dilutive and were therefore excluded from the computation of diluted
earnings per share (2003: 17.5 million and 17.7 million respectively).
Warrants to purchase approximately 1.4 million ordinary shares for the three
months to September 30, 2004 and for the three and nine months to September 30,
2003 were not dilutive and were therefore excluded from the computation of
diluted earnings per share.
3 months to 3 months to 9 months to 9 months to
September 30, 2004 September 30, 2003 September 30, 2004 September 30, 2003
No. of shares No. of shares No. No. of shares No. of shares
------------------ ------------------- ------------------ ------------------
Weighted average number of shares:
Basic 496,474,005 494,827,334 496,090,191 499,414,490
Effect of dilutive shares:
Stock options 2,474,699 2,628,923 3,086,390 2,043,820
Warrants - - 55,579 -
Convertible debt 10,828,348 18,370,565 15,838,142 19,072,392
----------------- ----------------- ----------------- -----------------
Diluted 509,777,052 515,826,822 515,070,302 520,530,702
----------------- ----------------- ----------------- -----------------
18
US GAAP Results for the 9 months to September 30, 2004
Selected Notes to the Unaudited US GAAP Financial Statements (continued)
Reconciliation of reported EPS:
3 months to 3 months to 9 months to 9 months to
September 30, September 30, September 30, September 30,
2004 2003 2004 2003
$'000 $'000 $'000 $'000
----------------- ---------------- ----------------- ----------------
Net income for basic EPS 77,040 64,619 185,621 193,170
Interest charged on convertible debt,
net of tax 766 1,200 3,432 3,923
----------------- ----------------- ----------------- -----------------
Net income for diluted EPS 77,806 65,819 189,053 197,093
----------------- ----------------- ----------------- -----------------
Income from continuing operations 15.5c 14.8c 50.4c 43.0c
Loss from discontinued operations - (1.7c) (4.1c) (4.3c)
Loss on disposal of discontinued - - (8.9c) -
operations
----------------- ----------------- ------------------ -----------------
Basic EPS 15.5c 13.1c 37.4c 38.7c
----------------- ----------------- ------------------ -----------------
Income from continuing operations 15.3c 14.4c 49.2c 42.0c
Loss from discontinued operations - (1.6c) (3.9c) (4.1c)
Loss on disposal of discontinued - - (8.6c) -
operations
----------------- ----------------- ------------------ -----------------
Diluted EPS 15.3c 12.8c 36.7c 37.9c
----------------- ----------------- ------------------ -----------------
(3) Analysis of revenues
3 months to 3 months to 3 months to 3 months to
September 30, September 30, September 30, September 30,
2004 2003 2004 2004
$'000 $'000 % change % of total
---------------- ---------------- ---------------- ----------------
Net product sales:
ADDERALL XR 140,051 121,255 16% 41%
AGRYLIN 49,721 25,907 92% 14%
PENTASA 33,025 19,838 66% 10%
CARBATROL 11,225 11,619 -3% 3%
Others 49,701 53,663 -7% 14%
---------------- ---------------- ---------------- ----------------
283,723 232,282 22% 82%
---------------- ---------------- ---------------- ----------------
Royalty income:
3TC 37,871 35,300 7% 11%
ZEFFIX 7,034 6,217 13% 2%
Others 11,294 8,218 37% 3%
---------------- ---------------- ---------------- ----------------
56,199 49,735 13% 16%
---------------- ---------------- ---------------- ----------------
Licensing and development 2,820 1,355 108% 1%
Other 2,167 6 n/a 1%
---------------- ---------------- ---------------- ----------------
Total revenues 344,909 283,378 22% 100%
---------------- ---------------- ---------------- ----------------
19
US GAAP Results for the 9 months to September 30, 2004
Selected Notes to the Unaudited US GAAP Financial Statements (continued)
9 months to 9 months to 9 months to 9 months to
September 30, September 30, September 30, September 30,
2004 2003 2004 2004
$'000 $'000 % change % of total
---------------- ---------------- ---------------- ----------------
Net product sales:
ADDERALL XR 422,997 338,847 25% 43%
AGRYLIN 121,995 102,132 19% 12%
PENTASA 86,705 74,311 17% 9%
CARBATROL 38,873 34,955 11% 4%
Others 133,027 182,269 -27% 13%
---------------- ---------------- ---------------- ----------------
803,597 732,514 10% 81%
---------------- ---------------- ---------------- ----------------
Royalty income:
3TC 115,673 106,979 8% 12%
ZEFFIX 20,174 18,337 10% 2%
Others 34,154 24,018 42% 3%
---------------- ---------------- ---------------- ----------------
170,001 149,334 14% 17%
---------------- ---------------- ---------------- ----------------
Licensing and development 10,217 2,451 317% 1%
Other 5,654 13 N/a 1%
---------------- ---------------- ---------------- ----------------
Total revenues 989,469 884,312 12% 100%
---------------- ---------------- ---------------- ----------------
20
Non-GAAP measures for the 9 months to September 30, 2004
Reconciliation of reported EPS:
3 months to 3 months to 9 months to 9 months to
September 30, September 30, September 30, September 30,
2004 2003 2004 2003
$'000 $'000 $'000 $'000
--------------- --------------- --------------- ---------------
Net income for diluted EPS 77,806 65,819 189,053 197,093
Reorganization costs, net of tax 7,244 - 23,069 -
Gain on sale of investment, net of tax - - (10,660) -
Discontinued operations - 8,686 64,292 21,608
--------------- --------------- --------------- ---------------
Net income for diluted EPS excluding
reorganization costs, gain on sale of
investment and the impact of the
discontinued operation 85,050 74,505 265,754 218,701
--------------- --------------- --------------- ---------------
Diluted EPS (as reported) 15.3c 12.8c 36.7c 37.9c
Add back:
Reorganization costs, net of tax 1.4c - 4.5c -
Discontinued operations - 1.6c 12.5c 4.1c
Gain on sale of investment, net of tax - - (2.1c) -
--------------- --------------- --------------- ---------------
Diluted EPS excluding reorganization
costs, gain on sale of investment and
the impact of the discontinued operation 16.7c 14.4c 51.6c 42.0c
--------------- --------------- --------------- ---------------
21
UK GAAP Results for the 9 months ended 30 September 2004
Unaudited and Unreviewed Consolidated Profit and Loss Account
3 months to 3 months to 9 months to 9 months to
30 September 30 September 30 September 30 September
2004 2003 2004 2003
(pound)'000 (pound)'000 (pound)'000 (pound)'000
--------------- --------------- --------------- ---------------
Turnover: group and share of joint venture 191,956 175,753 549,357 553,472
Less: share of joint venture's turnover - (790) - (2,326)
--------------- --------------- --------------- ---------------
Group turnover on continuing operations 191,956 174,963 549,357 551,146
Discontinued operations - 5,293 2,169 6,212
--------------- --------------- --------------- ---------------
Group turnover 191,956 180,256 551,526 557,358
Cost of sales (21,470) (24,213) (61,206) (73,709)
--------------- --------------- --------------- ---------------
Gross profit 170,486 156,043 490,320 483,649
Net operating expenses (131,209) (123,663) (371,389) (397,677)
--------------- --------------- --------------- ---------------
Operating profit: 39,277 32,380 118,931 85,972
- --------------------------------------------------------------------------------------------------------------------------
Continuing operations 39,277 35,818 129,719 98,393
Discontinued operations - (3,438) (10,788) (12,421)
--------------- --------------- --------------- ---------------
39,277 32,380 118,931 85,972
- --------------------------------------------------------------------------------------------------------------------------
Share of joint venture's operating loss - (580) - (2,571)
Loss on disposal of business - - (23,191) -
Finance charges, net (774) 380 2,556 3,557
--------------- --------------- --------------- ---------------
Profit on ordinary activities before taxation 38,503 32,180 98,296 86,958
Tax on profit on ordinary activities (16,540) (15,514) (53,589) (46,329)
--------------- --------------- --------------- ---------------
Profit on ordinary activities after taxation 21,963 16,666 44,707 40,629
Dividends (4) - (4,967) -
--------------- --------------- --------------- ---------------
Retained profit for the period transferred to
reserves 21,959 16,666 39,740 40,629
--------------- --------------- --------------- ---------------
Earnings per share
Basic
Net income 4.4p 3.4p 8.0p 8.1p
--------------- --------------- --------------- ---------------
Diluted
Net income 4.4p 3.4p 8.0p 8.1p
--------------- --------------- --------------- ---------------
22
UK GAAP Results for the 9 months ended 30 September 2004
Unaudited and Unreviewed Consolidated Statement of Total Recognised Gains and
Losses
3 months to 3 months to 9 months to 9 months to
30 September 30 September 30 September 30 September
2004 2003 2004 2003
(pound)'000 (pound)'000 (pound)'000 (pound)'000
--------------- --------------- --------------- ---------------
Profit for the period transferred to reserves 21,959 16,666 39,740 40,629
Translation of the financial statements of
overseas subsidiaries 10,173 (4,365) (6,849) 4,469
--------------- --------------- --------------- ---------------
Total recognised gains and losses for the
period 32,132 12,301 32,891 45,098
--------------- --------------- --------------- ---------------
23
UK GAAP Results for the 9 months to 30 September 2004
Unaudited and Unreviewed Consolidated Balance Sheet
(Audited)
30 September 31 December
2004 2003
(pound)'000 (pound) '000
--------------- ---------------
Fixed assets
Intangible assets - intellectual property 166,847 171,548
Intangible assets - goodwill 1,305,644 1,365,583
Tangible assets 58,467 97,054
Fixed asset investments 56,584 33,269
--------------- ---------------
1,587,542 1,667,454
--------------- ---------------
Current assets
Stocks 25,361 25,282
Debtors
- - due within one year excluding deferred tax 188,899 141,046
- - due within one year - deferred tax 35,686 36,049
- - due after more than one year excluding deferred tax 11,271 9,224
- - due after more than one year - deferred tax 12,248 -
Current asset investments 156,438 169,895
Cash at bank and in hand 580,901 621,670
--------------- ---------------
1,010,804 1,003,166
Creditors: amounts falling due within one year (237,564) (141,722)
Net current assets 773,240 861,444
--------------- ---------------
Total assets less current liabilities 2,360,782 2,528,898
Creditors: amounts falling due after more than one year
Convertible debt (64) (202,659)
Deferred tax - (782)
Other creditors (14,848) (16,957)
--------------- ---------------
(14,912) (220,398)
--------------- ---------------
Net assets 2,345,870 2,308,500
--------------- ---------------
Capital and reserves
Called-up share capital 24,191 23,895
Share premium 3,273,315 3,218,695
Exchangeable shares 139,986 190,425
Capital reserve 3,135 3,135
Other reserves 24,247 24,247
Profit and loss account deficit (1,119,004) (1,151,897)
--------------- ---------------
Equity shareholders' funds 2,345,870 2,308,500
--------------- ---------------
24
UK GAAP Results for the 9 months ended 30 September 2004
Selected Notes to the Unaudited and Unreviewed UK GAAP Financial Statements
(1) EPS
Basic EPS is based upon the profit on ordinary activities after taxation divided
by the weighted-average number of ordinary shares outstanding during the period.
Diluted EPS is based upon the profit on ordinary activities after taxation
divided by the weighted-average number of ordinary shares outstanding during the
period and adjusted for the effect of all dilutive potential ordinary shares
that were outstanding during the period.
Stock options to purchase approximately 9.8 million and 17.6 million ordinary
shares for the three months and nine months ended 30 September 2004
respectively, were not dilutive and were therefore excluded from the computation
of diluted earnings per share (2003: 17.5 million and 17.7 million
respectively).
The warrants to purchase approximately 1.4 million ordinary shares for the three
months ended 30 September 2004 and for the three and nine months ended 30
September 2003 were not dilutive and were therefore excluded from the
computation of diluted earnings per share.
The convertible loan note is excluded from the calculation of weighted average
number of shares for fully diluted earnings per share for the nine months ended
30 September 2004 and for the three and nine months ended 30 September 2003 as
they were not dilutive.
3 months to 3 months to 9 months to 9 months to
30 September 30 September 30 September 30 September
2004 2003 2004 2003
No. of shares No. of shares No. of shares No. of shares
------------- ------------- ------------- --------------
Weighted average number of shares:
Basic 496,474,005 494,827,334 496,090,191 499,414,490
Effect of dilutive shares:
Stock options 2,474,699 2,628,923 3,086,390 2,043,820
Warrants - - 55,579 -
Convertible debt 10,828,348 - - -
----------- ----------- ----------- ------------
Diluted 509,777,052 497,456,257 499,232,160 501,458,310
----------- ----------- ----------- ------------
Reconciliation of reported EPS:
3 months to 3 months to 9 months to 9 months to
30 September 30 September 30 September 30 September
2004 2003 2004 2003
(pound) '000 (pound) '000 (pound) '000 (pound) '000
------------- ------------- ------------- --------------
Profit for basic EPS 21,959 16,666 39,740 40,629
Interest charged on convertible debt, net
of tax 418 - - -
----------- ----------- ----------- ------------
Profit for diluted EPS 22,377 16,666 39,740 40,629
----------- ----------- ----------- ------------
25
UK GAAP Results for the 9 months ended 30 September 2004
Selected Notes to the Unaudited and Unreviewed UK GAAP Financial Statements
(continued)
(3) Basis of preparation
The Group has applied consistent accounting policies throughout both periods.
The results for the three and nine months ended 30 September 2004 have not been
audited and do not constitute statutory accounts within the meaning of Section
240 of the Companies Act 1985.
The financial information relating to the year ended 31 December 2003 has been
extracted from the full report and accounts which have been delivered to the
Registrar of Companies. The report of the auditors on those accounts was
unqualified.